South African wheels operators are currently grappling with increased operational expenses, all of which stand to impact the cost of coach charters and tours.
Petrol prices have jumped over the last two months, in part due to higher international prices, but also as a result of increased fuel levies. The General Fuel and Road Accident Fund levies were increased in April by a combined 52 cents a litre, pushing the total amount of taxes to R5.30 a litre. According to the Automobile Association, almost 40% of every litre of petrol is being paid to indirect taxes via fuel purchases.
South Africans are now paying well over R14 a litre at the pumps, the highest rate ever for fuel. If the rand doesn’t appreciate significantly against the US dollar, and if international prices don’t decrease, this will mean another increase into June, reports the AA.
Adding even more pressure, the association recently estimated that South African National Roads Agency Limited (SANRAL) toll fees had risen between 6% and 7% in the past year.
April also saw the increase of the VAT rate from 14% to 15% and, although ground transport is exempt from VAT, the increase affects the cost of doing business in general, placing wheels operators under additional pressure.
To quote Christiaan Steyn, Marketing Manager of Drifters Adventours: “The increased VAT and fuel levies are costs that cannot be absorbed by companies and so they are carried over to the consumer, which means costs for everything go up. Companies now need to be creative in their service offer to cover these costs, but not outprice themselves and lose business.”
Evelyn Patrick, Operations Manager at Snappy Coach Hire, concurs: “This has had a huge impact on our business. The increase to daily running costs for the buses has increased exponentially.”
She says inbound tourism will not feel the brunt that quickly, as rates quoted last year are still in force. In the local market, however, concerned corporates are cutting costs.
More recently, the now-resolved bus drivers’ strike compounded matters and protest action resulted in some coaches being stoned. Although incidents were limited, Patrick says the situation does not convey a good message at the time.
Tiffany Briggs, Marketing Manager of Mfafa Safaris, says the 1% VAT increase will do very little to influence the prices and bookings when clients are paying euros and dollars, however, she predicts that the increase will affect intraspecific travel by South Africans and SADC nationals.